ARA’s Dynasty Said to Plan Dual-Currency IPO in Singapore

The offering will test the appetite for yuan in Singapore, where the pool of deposits in the Chinese currency is about a 10th of that in Hong Kong. Photographer: Nelson Ching/Bloomberg

Sept. 12 (Bloomberg) -- ARA Asset Management, the manager
of property trusts backed by billionaire Li Ka-shing, is seeking
about S$800 million ($649 million) in the first dual-currency
initial public offering in Singapore, two people with knowledge
of the matter said.

ARA plans to offer shares of Dynasty Real Estate Investment
Trust in two tranches, one denominated in yuan and the other in
Singapore dollars, the people said, asking not to be identified
as the information is private. The company expects to get
approval from Singapore’s stock exchange for the listing as soon
as this week and the IPO may take place as early as in October,
two people said.

The offering will test appetite for yuan in Singapore,
where the pool of deposits in the Chinese currency is about a
10th of that in Hong Kong. Yuan deposits in Hong Kong have
fallen from a high in November as expectations for the
currency’s appreciation waned. The Singapore dollar tranche of
the IPO is aimed at tapping demand among individuals who don’t
have yuan to invest, one person said.

“They may be thinking there is a set of investors who do
value exposure to another currency, which opens up the number of
people who will buy their shares,” said Lee King Fuei, a
Singapore-based fund manager at Schroders Plc, which manages
more than $300 billion. Still, investors “might not be so hot
on this immediately” with a slowdown in China’s economic growth
dampening demand for the currency, Lee said.

Chinese Premier Wen Jiabao yesterday signaled there’s more
room for fiscal and monetary policy, as the government seeks to
prevent economic growth from slipping below the 7.5 percent
target set in March.

Chinese Property

An official at ARA declined to comment in an e-mailed
response to questions yesterday. ARA said in March that it’s
exploring the possible establishment and listing of a real
estate investment trust with assets located in China and traded
in yuan. The REIT is backed by three commercial properties in
the cities of Shanghai, Nanjing and Dalian, two people said.

Singapore Exchange Ltd. has allowed securities including
stocks and exchange-traded funds to be listed in two currencies
since April. Hutchison Port Holdings Trust, which completed an
IPO denominated in the U.S. currency in March last year, started
trading in both U.S. and Singapore dollars on April 2 of this
year.

Hutchison Port’s Singapore-dollar denominated shares closed
at S$0.855 apiece yesterday, while its U.S. dollar shares ended
trading at $0.695, down 31 percent from their IPO price of
$1.01.

Yuan Deposits

Singapore’s bourse said in July it plans to start listing
securities denominated in the Chinese currency as it seeks to
boost its position as an offshore yuan center. Hong Kong-listed
Hui Xian Real Estate Investment Trust is the only company with
shares denominated in the currency outside of mainland China.

Depositors in Singapore hold about 60 billion yuan ($9.5
billion), the Straits Times newspaper reported in June, citing
Ong Chong Tee, deputy managing director at the Monetary
Authority of Singapore. Deposits in Hong Kong fell to 563
billion yuan in July from a record 627 billion yuan in November,
according to data from the city’s Monetary Authority.

“Expectations for the renminbi’s appreciation fall as
China’s trade volume shrinks, and the popularity of stocks
denominated in the currency goes down,” said Michiya Tomita, a
Hong Kong-based fund manager at Mitsubishi UFJ Asset Management
Co., which oversees $70 billion. “In the long term, the
currency will strengthen with the Chinese economy and demand for
yuan-denominated listings will grow.”

Twelve-month non-deliverable forwards for the Chinese
currency traded at 6.4203 per dollar as of 9:34 a.m. in Hong
Kong today, a 1.3 percent discount to the spot rate in Shanghai,
according to data compiled by Bloomberg.

Hui Xian

Also backed by Li, Asia’s richest man, Hui Xian has fallen
28 percent since its April 2011 debut, closing at 3.77 yuan
yesterday in Hong Kong. The company raised 10.5 billion yuan in
its initial public offering.